If the cost price is 96% of the selling price, then what is the profit percentage?

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Points to Remember:

  • Profit is calculated as Selling Price (SP) – Cost Price (CP).
  • Profit percentage is calculated as (Profit/Cost Price) * 100.
  • The relationship between cost price and selling price determines profit or loss.

Introduction:

This question requires a factual and analytical approach to determine the profit percentage based on the given relationship between the cost price (CP) and the selling price (SP). The problem states that the cost price is 96% of the selling price. This implies that the selling price is higher than the cost price, indicating a profit situation. We will use basic profit and loss calculations to determine the exact profit percentage.

Body:

Understanding the Relationship between CP and SP:

The problem provides the following information: CP = 0.96 * SP. This means that for every $100 of selling price, the cost price is $96. The difference represents the profit.

Calculating the Profit:

Profit = SP – CP
Since CP = 0.96 * SP, we can substitute this into the profit equation:
Profit = SP – 0.96 * SP = 0.04 * SP

Calculating the Profit Percentage:

Profit percentage is calculated as: (Profit / CP) * 100

Substituting the values we have:
Profit Percentage = (0.04 * SP / 0.96 * SP) * 100

The SP cancels out, simplifying the equation to:
Profit Percentage = (0.04 / 0.96) * 100 = (1/24) * 100 ≈ 4.17%

Therefore, the profit percentage is approximately 4.17%.

Conclusion:

In summary, if the cost price is 96% of the selling price, the profit is 4% of the selling price. Calculating this as a percentage of the cost price, we find that the profit percentage is approximately 4.17%. This simple calculation demonstrates the fundamental principles of profit and loss calculations. Businesses can use this type of calculation to determine pricing strategies, assess profitability, and make informed decisions regarding their operations. Understanding these basic principles contributes to sound financial management and sustainable business growth.

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